Question

In: Operations Management

Why do you think micropayments have not been implemented very well on the Web thus far?

Why do you think micropayments have not been implemented very well on the Web thus far?

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Expert Solution

Micropayments Have Not Been Implemented Very Well on The Web Thus Far?

The history of the web is full of micropayments startups, who tried to give people an easy way to pay for the online content. The industry saw many new startups like Beenz, Bitpass, and peppercorn rise and fall. The two-pronged challenges were first to actually build the system and then get the people to buy using micropayments.

The key challenges or issues impacting micropayments were as follows:

  • Technical challenges: Electronic micropayment is stored and transported digitally which require a secure digital transfer platform. The digital transfer is by a sequence of bits so it is easy to copy them. The key technical issues are as follows:
  1. Security: Security implementation is a challenge and has to be managed. Any failure of the underlying technology, software, and hardware can decrease the trust of micropayments.
  2. Scalability: The scalability of change has to adapt to rapidly changing technology as the transaction traffic increases rapidly.
  3. Reliability: Reliability is important as micropayments must serve the customers 24 by 7 and 365 days a year. There should be no point of failure at any time.
  4. Interoperability: The interoperability of cheques and tokens should be applied in different micropayment systems. It should also work with different systems of and protocols.
  5. Anonymity: It is the concern related to how much information other parties have of others. The banks and merchants have no anonymity, the customers have partial anonymity. Anonymity is a technical challenge.

To conclude many technical issues have not been addressed especially for making it comfortable for use by the public and a wider audience.

  • Social issues

Micropayments would require people to pay for online content. The people are used to getting content free and would be reluctant for paying to see the new online or to download tunes.

The key challenges are as follows:

  1. The barrier to access: Placing even a small fee on the website will deter the consumers
  2. Changing habits: Placing a fee may place a burden on low social economic classes and change their internet use.
  3. Assessment of cost: The fee forces the user to define if the content and its cost are competitive.
  • Economic challenges

There are certain economic challenges which are restricting micropayments implementation online. They are as follows:

  1. Transaction cost: First is the inability of the companies to keep transaction cost low about the actual transaction amount. Slowly the company has diverted to prepayment or post-payment system.
  2. Mental transaction cost: The online content will have to evaluated continuously against its costs. The consumers will have to choose if the content is worth the value. It will require decision making continuously. This results in the ineffective implementation of micropayments.
  3. Value of free: The user is used to getting most content free. The need to change the mindset and pay for free content will be evaluated. The micropayment act as a barrier to the usage of the content.


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